One oft-invoked disincentive to employers’ litigating FLSA claims (specifically non-class or collective claims) is the statute’s fee shifting provision: when a plaintiff prevails (however nominally), he is entitled to have his “reasonable” attorneys’ fees paid by the employer defendant (however the principle does not apply to a defense victory). In such cases, the individual plaintiff’s damages may be quite nominal, but substantial amounts of attorney time are required to take the case through trial. In a new decision, the Court of Appeals for the Seventh Circuit vacated a magistrate’s decision which sought to deny a plaintiff’s attorney substantially all of his fee in just such a case, clarifying the standards governing attorneys’ fee awards under the FLSA within the Circuit. Johnson v. GDF, Inc., 2012 U.S. App. LEXIS 2810 (7th Cir. Feb. 13, 2012).

Johnson concerned an FLSA retaliation case brought by the attorney Earnest T. Rossiello, whose settlement negotiations and fee applications had already been the subject of numerous opinions within the Northern District of Illinois. In Johnson, Mr. Rossiello litigated his client’s case through to trial and obtained a modest verdict of $5,000 on Johnson’s claim that he was fired for complaining about FLSA violations. The Magistrate Judge, calling his conduct in the matter “yet another example of Ernest T. Rossiello’s self-serving litigation tactics,” struck substantially all of his attorney’s fee application. On appeal, the Seventh Circuit reversed, distinguishing the case at bar from the earlier case relied upon by the Magistrate Judge in cutting the fee, as being one where Mr. Rossiello did have to establish liability and demonstrate (as he did before a jury), that his client had been terminated for an unlawful purpose. Based on his success and the contested nature of the litigation, his conduct to that point in the case did not reflect an unreasonable unwillingness to settle. Nor, in the appellate court’s view, could defendant properly claim to have been “misled” by Plaintiff’s $10,000 settlement demand, when it itself had the information in its possession to assess Plaintiff’s claims.

The problem of fee shifting in small dollar FLSA cases persists, and the Johnson case is one of many examples. Courts will be reluctant to refuse to compensate counsel for their services when they obtain a favorable result for their client, notwithstanding the size of that recovery, or (as argued by some as important) the ratio of the plaintiff’s recovery to that of his or her attorney. Defense counsel must continue to use all available mechanisms, including offers of judgment under FRCP 68 where applicable, to minimize exposure to attorneys’ fee claims in these cases.

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